Option to Purchase (OTP) For Private and HDB Properties: What You Need to Know

In this era of online shopping, banking and well, pretty much everything, many of us are familiar with the acronym ‘OTP’. But aside from meaning ‘one-time password’, did you know that OTP is also short for ‘Option to Purchase’? 

In the property world, an Option to Purchase (OTP) is a legal agreement between the buyer and seller (or developer) for the sales of a residential property. When you sign the OTP agreement, you’ll need to pay an option fee to ‘reserve’ the property. If you ‘back out’ of the purchase – i.e. you do not exercise the option by the expiry date – you forfeit the amount paid. 

Here’s a guide to what is the OTP and its implications. 

No time to read? Here’s a quick summary:

  • An Option to Purchase (OTP) is a legal agreement between buyer and the seller to buy a residential property 
  • The buyer pays an option fee and is granted the rights to buy the property for the option period (three weeks)
  • If the buyer does not purchase, the seller has the right to forfeit the option fees 

Option to Purchase for Private property

Option to Purchase for HDB resale flat

OTP agreement drafted by seller’s lawyer 

To use HDB’s OTP form 

OTP agreement signed by buyer and seller after agreeing on the price 

OTP agreement granted by seller at least 7 days after registering Intent to Sell on HDB Resale Portal, signed by buyer 

Option Fee usually 1% of purchase price (negotiable), paid by buyer

Option Fee not exceeding $1,000, paid by buyer 

Option Period typically 14 days (negotiable up to 2 months) 

Option Period is 21 calendar days 

Need more detail? Here’s our full guide to the OTP agreement. 


What’s an Option to Purchase (OTP) agreement? 

An OTP agreement is a legal contract signed between a buyer and a seller of a residential property, and basically gives the buyer the exclusive rights to purchase a property from the seller in the future.  

After you and the seller have agreed on the terms and purchase price of the property, the seller will grant you the OTP document. To “reserve” the property from the seller, you’ll need to first pay a small booking deposit, which is known as the Option Fee.

In exchange, the seller won’t look for potential buyers and cannot sell the property to another party during the agreed period of time stated on the OTP. This Option Period gives some time for both you and the seller to consider going ahead with the deal. 

In order to make the OTP agreement as complete as possible, the seller can hire a property lawyer to draft the document before sending it to you. The conditions of this agreement is generally governed by the Law Society’s Condition of Sales 2012.

On receiving the OTP, you can engage a lawyer to review, negotiate, and request to amend any of the terms before signing. 

To get a feel of how the document looks like, you can download a copy of the OTP for private property from CEA (Council for Estate Agencies) here

If you’re buying an HDB resale flat, you and the seller must use the OTP document prescribed by the HDB.  

Note: Bear in mind that as a buyer, you’re not obliged to buy the property from the seller after signing an OTP agreement. Rather, you can still consider whether or not you want to purchase the property, while exploring other options.


URA clamps down on developers, re-issuing of OTPs no longer allowed (wef 28 Sep 2020)  

Although sellers have the right to forfeit the option fee and put the property back up for sale when buyers do not exercise their option by the OTP expiry, there was reportedly been a growing trend of developers not enforcing this rule.

To incentivise buyers, some developers agreed to let buyers ‘cancel’ for free or re-issue the OTP, essentially extending the buying window for buyers. This was beneficial to those who wanted to ‘lock in’ early bird discounts but needed more time to decide and/or rustle up the cash for the purchase. This was especially since the most recent property cooling measures were announced in 2018, slowing the market.

Previously, this was allowed and sellers could extend the OTP for up to 18 months. However, with effect from 28 September 2020, housing developers will no longer be allowed to exploit this loophole. The new restrictions announced will… 

  1. stop developers from providing upfront agreement to purchaser(s) to re-issue OTPs
  2. stop developers from re-issuing OTP to the same purchaser(s) for the same unit within 12 months after the expiry of the earlier OTP
  3. require developers to inform purchaser(s) of these conditions upfront. 

This means that if you want to buy the property, you must exercise your option within three weeks (the OTP period). If you decide not the purchase and change your mind thereafter, the developer cannot re-issue (i.e. extend) your OTP, and you must wait for 12 months.  

If you really need more time, you can, however, formally apply for an extension by emailing URA. You can extend the window by up to 12 weeks from the OTP date, provided both you and the developer are agreeable. You can read more about this latest restriction by URA here: URA Restricts Re-Issue Of OTP

Implications of this restriction on re-issuing of OTP

Christine Li, Head of Research, Singapore and Southeast Asia, Cushman & Wakefield, predicts that the new measures would have a slight cooling effect on property market this quarter and that buyers would be more cautious in the face of a non-extendable deadline. However, citing recent caveat statistics from URA—around 2047 units were sold in July and August 2020, 30.5% higher compared to 1568 units sold in the same period in 2019—she says that market activities are likely to remain “relatively healthy” as there is genuine demand in the private property market.

“Though this could be partially due to accumulation of demand due to the circuit breaker, it is still a reflection of strong underlying demand for private residential properties, given the weak economic environment,” she says. 

Lee Sze Teck, Director (Research), Huttons Asia, shares that this is likely to have a larger impact on HDB upgraders as the sale of a HDB flat typically takes longer than three weeks. He also points out that there “may be spillover demand to the EC market following this announcement” because since no one is legally allowed to own both a HDB flat and EC at the same time, there is no ABSD rule for executive condos (ECs). 


When is the OTP agreement signed? 

This is usually how the signing of the OTP fits into the property buying process:

  1. The seller lists the property on a property listing website
  2. An interested buyer will view the property and negotiate the price and terms. 
  3. After the buyer and seller have come to an agreement, the seller will hire a lawyer to draft an OTP document (in the case of private property) and send it to the buyer for review. 
  4. Once both parties are agreeable to the terms, the buyer will pay the Option Fee to the seller, and the seller will sign the document. 
  5. Once signed, the OTP becomes a legally binding document. An acceptance copy will also be sent to the buyer. 


For HDB Resale Transactions

Do take note that if you’re buying an HDB resale flat, both you and the seller must register your Intent to Buy and Intent to Sell on HDB resale portal respectively. . 

In addition, the seller can only grant the OTP to you seven days after he’s registered his Intent to Sell

If you wish to take an HDB Concessionary Loan, you’ll need to obtain an HDB Loan Eligibility (HLE) letter from HDB when the seller grants you the OTP. 

If you’re taking a housing loan from the bank, you’ll need to get a Letter of Offer or Approval in Principle (AIP) from a bank before reaching the OTP stage. You’ll need this letter when you exercise the OTP. 


What’s Within an Option to Purchase (OTP) Agreement?

A property agent explaining an Option to Purchase agreement to a couple
Be sure to read through the Option to Purchase carefully before signing

As mentioned previously, if you’re buying an HDB resale flat, you’ll have to use the OTP agreement from HDB. For private property, the seller’s lawyer or property agent may prepare the document. 

The OTP agreement should typically cover these basic elements: 

1. Option Fee

To be negotiated with your seller, the option fee is usually 1% of the purchase price for private properties, or not more than $1,000 for an HDB resale flat. 

2. Option Period

Typically 14 days. However, this period is negotiable and can be extended to 2 months. For HDB resale flats, this will be 21 calendar days including Saturday, Sunday, and public holidays. 

3. Details of the Property Being Sold

Including the following: 

  1. Purchase price 
  2. Floor area 
  3. Address

4. Details of Both Buyer and Seller

Including the following: 

  1. Full names 
  2. IC numbers 
  3. Contact numbers 
  4. Addresses

5. What Happens if the OTP Is Not Exercised Before It Expires

It should state whether or not the Option Fee will be forfeited. 

6. Whether the Property Is Furnished or Vacant.

If the property is being sold together with its furnishings, the OTP should include an inventory list. 

7. Obligations of the Buyer and Seller

If you’re unsure of any of the terms stated in the OTP, be sure to clarify with your seller. You can also seek legal advice if needed. 


What Happens When the Buyer Chooses to Exercise the OTP?

The procedure is a little different for HDB resale flats and private property. 

For HDB Resale Flats

You’ll first need to sign on the “Acceptance” section, and have a witness sign the HDB OTP. The witness can either be: 

  • A property agent
  • A Singapore Citizen or Permanent Resident who’s at least 21 years old, and is not involved in the resale transaction

When you exercise the OTP, you’ll also need to pay the seller a deposit, which you can negotiate with him or her. Do keep in mind that together with the Option Fee, this deposit cannot be more than $5,000. 

After that, both you and the seller will need to submit the resale application to HDB within the agreed number of days reflected in the OTP. 

Do take note that both you and the seller will need to submit your respective portion of the application to HDB within seven days of each other. The resale application is only complete when HDB has received the application from both sides. 

For Private Property

As with the case for HDB resale flats, you’ll need to sign the acceptance copy of the OTP and pay the deposit fee. What’s different is that the deposit fee is usually 5 to 10% of the purchase price, minus the Option Fee. 

In general, for both resale and private properties, you and the seller will agree on a date of completion for the sale. Typically, this is around 10 to 12 weeks from the signing of the OTP. 

As a buyer, you’ll also need to pay the Buyer’s Stamp Duty (BSD) within 14 days of exercising the OTP. 

BSD Rates (20 February 2018 onwards): 

Purchase price or market value of the property

BSD rates for residential property

First $180,000


Next $180,000 


Next $640,000


Remaining amount 



[article thumbnail=”https://cdn-cms.pgimgs.com/static/2020/03/Buying-property-doesn-t-mean-having-enough-for-just-the-property-itself-since-you-need-to-account-for-Buyer-s-Stamp-Duty.jpg” title=”Want to find out more about the Buyer’s Stamp Duty (BSD)? Read our guide here.” category=”Buying”]https://www.propertyguru.com.sg/property-guides/buyers-stamp-duty-singapore-13043[/article]

In addition, you may also need to pay Additional Buyer’s Stamp Duty (ABSD), depending on your citizenship status and how many residential properties you’ve bought. 

ABSD Rates:

If you’re a 

ABSD rates for residential property

Singapore Citizen buying a second residential property


Singapore Citizen buying third and subsequent residential property


Permanent Resident buying first residential property


Permanent Resident buying second and subsequent residential property 


Foreigners buying any residential property



[article thumbnail=”https://cdn-cms.pgimgs.com/static/2020/01/ABSD-was-first-introduced-in-2011-as-a-property-cooling-measure.jpg” title=”For more information about the Additional Buyer’s Stamp Duty (ABSD), read all about it here.” category=”Buying”]https://www.propertyguru.com.sg/property-guides/what-you-need-to-know-about-additional-buyer-s-stamp-duty-13034[/article]


Other FAQs on OTP

Still don’t quite understand? Here are some frequently asked questions (and answers) on the OTP agreement and process. 

How Do You Get an Option to Buy?

The seller (could be the previous homeowner or housing developer) will grant it to you (the buyer), who must sign it and pay the option fee. 

Is OTP a Contract?

Yes, once signed by all involved parties and option fee paid by buyer, the OTP agreement is a legally binding document. 

Does the Seller Keep the Option Fee?

Yes, the option fee is given to the seller. 

What Happens if the Buyer Decides Not to Buy the Property?

If you decide to “cancel” the OTP by not exercising it within the Option Period, you’ll have to forfeit the Option Fee. Unless stated in the document, the seller will get to keep the Option Fee. 

After the Option Period has ended, the seller is allowed to put up the property for sale again. 

What Happens if Either Party Decides to Back Out After Signing the OTP?

If you back out after signing the document, you’ll have to forfeit the Option Fee. If the seller backs out of the deal and “cancels” the OTP, he’ll have to refund the Option Fee to you.


[article thumbnail=”https://cdn-cms.pgimgs.com/static/2019/11/property-conveyancing-in-singapore-legal-procedure.jpg” title=”Property conveyancing in Singapore: the FULL step-by-step guide” category=”Buying”]https://www.propertyguru.com.sg/property-guides/property-conveyancing-in-singapore-guide-20092[/article]

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